Buy A New Home
Buy A Home With A Reverse Mortgage
If you are 62 years or older, the Home Equity Conversion Mortgage (HECM) for Purchase Loan can help you buy your next home without required monthly mortgage payments. The HECM for Purchase is a Federal Housing Administration (FHA) insured home loan that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long you live in the home or what happens to your home’s value, you only make one, initial investment (down payment) towards the purchase. Customer benefits include:
- Eliminates monthly mortgage payments
- Increases your purchase power
- Preserves your cash
Why Use a Reverse Mortgage to Purchase
No matter what your needs may be, a HECM for Purchase Loan can help increase purchasing power and flexibility when buying a primary residence. Many home buyers use the HECM for Purchase Loan to:
- Right-size to a smaller, lower maintenance home
- Buy a home closer to family or friends
- Lower their cost of living during retirement
- Enjoy carefree living in a senior housing community
Since monthly mortgage payments are not required, a HECM for Purchase Loan may help preserve your hard-earned savings and improve cash flow. You will continue to own and maintain the title of your home for as long as the property remains your primary residence.*
* Reverse mortgages are loans offered to homeowners who are 62 or older who have equity in their homes. The loan programs allow borrowers to defer payment on the loans until they pass away, sell the home, or move out. Homeowners, however, remain responsible for the payment of taxes, insurance, maintenance, and other items. Nonpayment of these items can lead to a default under the loan terms and ultimate loss of the home. FHA insured reverse mortgages have an up front and ongoing cost; ask your loan officer for details. These materials are not from, nor approved by HUD, FHA, or any governing agency.
- Youngest titleholder must be 62 years or older
- Purchased home must be a primary residence occupied within 60 days of loan closing
- Property must be a single family home, 2-4 unit dwelling or an FHA approved condo
- The difference between the purchase price of the new home and the HECM loan proceeds must be paid in cash from qualifying sources such as the sale of prior residence, home buyer’s other assets or savings
- Borrower must complete a HUD approved counseling session
The amount of money you may receive from a HECM for Purchase Loan depends on the age of the youngest titleholder, current interest rates and fees, and the lesser of the appraised value, the purchase price or the FHA lending limit.
Safeguards for Buyers
Mortgage Insurance Premium (MIP) ensures the amount owed on the loan can never be more than the value of the home at time of sale
- Independent HUD counseling is required prior to loan application
- Lender may only look to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value (non-recourse loan)
A Quick Example
Robert and Kerry, both 67 years old, want to buy a lower maintenance home. They work with a real estate agent to sell their current residence and also look for a new home that fits their needs. The new home’s purchase price is $300,000. The real estate agent introduces Robert and Kerry to a Reverse Mortgage Adviser.
The adviser shows the buyers how the HECM for Purchase Loan could provide the funds they need for their new home. Robert and Kerry can use proceeds from a HECM for Purchase Loan of $148,478 and they can use cash from the sale of their previous home of $151,522 to purchase a new $300,000 home with no monthly mortgage payments.
This example is based on the age of the youngest borrower, a fixed rate of 4.75%, an appraised value of $300,000, origination charges of $2,500, a mortgage insurance premium of $7,500, other settlement costs of $3,783. Interest rates may vary.
Trigger term disclosure – Example 30 Year Fixed: Loan amount $300,000, 20% down, monthly P & I payment $1,475.00, APR 4.389%.